Digital Transformation Is a Stepping Stone to Innovation

What could Greek philosopher and master storyteller Heraclitus know about digital transformation? More than you might think.

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Heraclitus philosophized that change is central to the universe, and he was best known for comparing the cosmos to fire—living, connected, and constantly changing.

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In business, fire is an apt comparison for growth and innovation. Think of terms like “growth hacking” and “going viral” and what they represent—both mimic the path of a fire starting, growing, consuming and changing everything in its path. A small company that has a wildly successful crowdfunding campaign changes dramatically; almost overnight. Likewise, a large company that perfects an algorithm for efficiency and growth (think cracking the Amazon FBA code) won’t look the same after a few weeks of increased orders.

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Digital transformation is not about digitizing a single process or adopting a new technology—It’s about accelerating business activities, lowering cost, improving time to market, bringing positive change in processes, employees, and business models.

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Another way to put it is that digital transformation is the key to innovation in all aspects of your organization. Done correctly, the effects will be felt internally and externally, and will be (you guessed it) transformative.

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By the way, feel free to think of this as a business transformation—yes, you’ll have to digitize all your processes, which is not without its costs, but only then can you start to quantify, streamline, and innovate your business activities.

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Looking for some examples of digital transformation leading to innovative new business models to ground your thinking? We’re glad you asked!

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Examples of Digital Transformation in Action

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When you think of digital transformation, what types of business or product comes to mind? Square cheeseburgers? No? Perhaps they should.

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Wendy’s recently set some lofty revenue goals for 2020 at its investor's day, and more importantly, the plan to go along with it. But instead of reducing costs and striving for incremental gains, Wendy’s has chosen to embrace digital transformation to lead the charge.

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90 Degree Labs, a lab staffed with engineers and user experience experts outside of Ohio State University, was formed just 18 months ago to prepare Wendy’s for the future. It has three areas of tactical focus: their website, their mobile apps, and their in-store digital kiosks.

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Wait—in-store digital kiosks? Let’s back up a second.

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In response to minimum wage laws, Wendy’s has an aggressive plan to implement the ability for customers to order via touchscreen menu in 2017. But saving on employee costs isn’t the only benefit of digital kiosks; transforming a fast food order into a digital process provides an opportunity to create more data.

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For instance, imagine you’re ordering a delicious, square cheeseburger via digital kiosk and you’re offered a 20% discount for signing up for their loyalty club—would you take it? Some people would, and now those people can be reached via email to encourage website visits or app downloads. The kiosk is a gateway to mobile ordering, something Taco Bell has been trying for a few years.

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Done correctly, digital transformation can create a much stickier customer experience, and we’re not just talking about ketchup stains.

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Or, look at an example from the small business world. Etsy was one of the first technology platforms to offer end-to-end support to the DIY community. By removing just about all the barriers to order creation and fulfillment (marketing, payment gateways, and shipping), Etsy empowered amateur DIY-ers to turn pro. Combined with sales analytics, small business owners were able to shore up their product forecasting, find margin, and create enough revenue to grow their business by upgrading equipment, hiring staff, etc.

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And what has Etsy received in return? A 3.5% commission on all transactions, nominal fees from each listing to cover web hosting, advertising revenue, and oh yeah, the brand is now synonymous with DIY and attracts crafters and shoppers from around the world.

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All possible because Etsy transformed an analog process (setting up shop at the local farmers market) into a digital platform (online shop and fulfillment).

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3 Ways to Innovate

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Innovation through digital transformation isn't a new idea, but there's still plenty of green space for you to consider. Whether you're just starting or are mid-transformation, here are three areas where you may want to take a closer look.

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1. Customer transformation

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Not sure where to start with your innovation efforts? Start with the customer. In both of the examples from earlier in the blog post, the benefits to the customers are apparent.

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For Wendy’s, the path to mobile ordering could limit wait times in lines, and possibly help people find deals based on their purchase history.

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With Etsy, there are actually two customers, and each receive benefits. The store owner is able to publicize their products by virtue of being part of Etsy’s network and search algorithm. The buyers are able to locate all sorts of ‘hard-to-find’ homemade items all in one place.

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If you’re trying to innovate without considering the market need, you might want to go back to the drawing board.

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2. Create systems to derive value from information

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As we embrace always-on technology to help us become more social and more connected, context becomes increasingly important. For instance, say you’re a journalist researching a topic on a deadline—that 15 second video pre-roll ad might be the spawn of the devil. But, what if you’re cruising the mobile web as you wait for a bus—those 15 seconds are possibly annoying, but livable.

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The point is, using big data to provide context around your customer and the situation she is in is crucial to the overall experience.

Lastly, if you’ve already considered your customer and are using all data sources available to provide context, the last step is to scale those experience with highly customizable digital tools. Think of how Google Home and Amazon Alexa changed the smart home experience at massive scale.

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The point is that digital transformation isn’t the end of the tunnel—it is the tunnel. It can take your business down unexpected paths including new customers, new products, and new revenue stream; just to name a few. Digital transformation is the conduit for true innovation.

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